Insurance Commissioner Must Decide How Much Homeowner Rates Will Go Up

Homeowners could see their insurance rates go up – some by as much as 30 percent – if a request by the N.C. Rate Bureau is approved.

The Rate Bureau, which represents all the insurance companies that write homeowners policies in North Carolina and is charged by law with making rate increase requests on behalf of those insurers, has filed the request with the N.C. Department of Insurance.

While the overall statewide average increase is 17.7 percent, the proposed increases range from 1.2 percent for homeowners living in Greensboro or Winston-Salem to 30 percent for homeowners living in a number of coastal areas, said Raymond Evans, general manager of the rate bureau.

Not surprisingly, coastal residents and their elected officials are not happy about the magnitude of the request.

If approved, the rates would become effective for all new and renewal policies written on or after June 1, 2013. The state insurance commissioner has 50 days from the Oct. 1 filing date to respond to the proposal. He either can accept the filing, and the rate would go into effect next year, deny the filing and order a public hearing on the proposal (which would likely occur sometime next year), or negotiate a different resolution to the request.

“Historically, the department has never allowed a homeowners insurance rate filing to automatically come into effect,” said Insurance Commissioner Wayne Goodwin.

Since 2000, there have been four other homeowners insurance rate increase filings, Evans said. In all four, the rate approved was only a fraction of the requested increase.

In 2002, the Rate Bureau requested a 20 percent increase; a 5 percent increase was approved, he said. In 2005, a 12.1 percent increase was requested, with 2.2 percent being approved. In 2007, a 21.9 percent increase was requested, with a 5.4 percent increase being approved. In 2009, a 4.1 percent increase took effect; the bureau had requested a 19.5 percent increase.

Goodwin, a Democrat, faces Republican Mike Causey in the Nov. 6 general election for commissioner of insurance.

“I would fight that rate increase right from the beginning,” Causey said. “I just don’t think we have fair rates at this time.”

Goodwin said it’s easy to make a statement like that if you’re not actually in the position of reviewing the request and coming up with a decision.

He said he must follow due diligence, scrutinize, and carefully review the request before making a decision. If he doesn’t, his decision could be voided, which could result in the full increase taking effect, Goodwin said.

“You can’t prejudge,” Goodwin said, adding, “My record on consumer protection and pushing back on insurance rates is evident.”

Both Causey and Goodwin say they understand that they have to operate in a way that both protects communities and allows insurance companies to be solvent, making enough money to stay in business in the state.

“There’s an equal balance required as insurance commissioner,” Goodwin said.

“I want to be fair to all sides,” Causey said.

The Rate Bureau has the legal charge of taking information from all homeowners insurance companies operating in the state and acting as an “aggregate carrier,” Evans said. The bureau is supposed to come up with rates that are adequate but not excessive, he said.

“Whatever is approved by the commissioner, that is the rate that carriers have to use, although they can go downward with that,” Evans said. Companies can offer discounts, such as a lower price for having an alarm system or having combined auto and homeowners insurance policies, he said.

Companies also could have higher prices if mutually agreed upon between the company and the customer, he said. One example of this could occur if a homeowner was having difficulty finding a company to insure his property elsewhere, Evans added.

Evans said a lot of variables go into figuring out what the cost to insurance companies would be for covering homeowners’ loss claims. He said things such as fires, damage from leaky water pipes, injuries on a person’s property and weather damage (such as with tornadoes and hailstorms) don’t have a great deal of impact on rate increases.

“We know we’re going to have tornadoes and hailstorms every year,” Evans said. “We don’t know where.”

Hurricanes, however, are do have an impact, he said. “These are big events when they come ashore,” Evans said. “That’s why the increases are in the coastal areas.”

Causey said there is a public outcry over the proposed increases.

The Carteret County commissioners have adopted a resolution opposing the increase, as have a number of coastal towns.
Causey said he’d like to work out a different rate plan for North Carolina homeowners.

“I’m willing to sit down with the Rate Bureau and the insurance companies and look at the rates for the whole state,” Causey said.

However, he acknowledges that doing so could be complex. “I’m not saying there’s any magic bullet,” Causey said.

Barry Smith is an associate editor of Carolina Journal.